Why Looming Budget
Battles Might Still Shut Down the Gov’t

The Securities and Exchange Commission, Environmental
Protection Agency and Department of Health and Human Services could face
partial shutdowns this fall, as a politically polarized Congress faces a Sept.
30 deadline to approve a new federal budget.

During the contentious budget process, Congress typically
passes "continuing resolutions" to fund federal agencies while
legislators work out their differences.

Two prominent congressional scholars, Norman Ornstein of the American
Enterprise Institute and Sarah
Binder of the Brookings Institution, said the upcoming battle over the
federal budget could result in agency shutdowns.

Here's a breakdown of what to expect during this year's
budget process:

How does the federal
budget process normally work?

Congress is supposed to approve each year's budget before
the new fiscal year starts on Oct. 1. But this rarely happens: Congress has missed
the deadline for the past 16 years. To buy itself more time to work out
disagreements, Congress typically passes "continuing
resolutions," which provide temporary funding for government agencies,
often at the same funding level as the previous year.

Last year, Congress needed six continuing resolutions before it finally came to an agreement in April — already six months into
the fiscal year. Congress made that agreement only
hours before the federal government would have been forced to shut down.

It's important to remember that the government gets two
types of funding: mandatory
spending, which funds entitlement programs like Social Security, Medicaid
and Medicare; and discretionary spending, which funds the rest of the
government's agencies and departments.

Discretionary spending is broken up into 12 appropriations
bills, which can be passed separately or bundled together as an
"omnibus" bill.

Last year's budget negotiations were contentious. When an
11th-hour bipartisan agreement was finally reached to avoid a general
government shutdown, many
Republican lawmakers felt betrayed. Fifty-nine House Republicans broke with
Speaker John Boehner and voted against the budget compromise.

Because of the political fallout from last year's budget,
Norman Ornstein argues, House Republicans will be even less willing to
compromise with the 2012 budget.

Added to this backdrop is the success of the Republicans'
"hostage taking" tactics in the debt-ceiling negotiations. Senate
Minority Leader Mitch McConnell told the Washington
Post that he could see the Republicans
using the same strategy again.

"The usual practice, back when we had sane government,
was you [fund the government] at the previous years' levels until you reach an
agreement," Ornstein said.

But last year, two of the stopgap resolutions that
temporarily funded the government also included $4 billion and
then $6
billion in cuts.

"You can put anything you want in a continuing
resolution," Ornstein said.

At least in theory, he suggested, a continuing resolution
could deny funding to a particular agency or set of agencies — the
Department of Health and Human Services, for instance. "That means, if you
can't reach an agreement, you shut down the FDA [Food and Drug Administration],
you shut down the CDC [Centers for Disease Control and Prevention]."

"My sense is that Republicans feel that they've moved
the debate and moved the norms here," Binder said. "In order to buy
time, you have to pay a little bit. I wouldn't be surprised for the Republicans
to say, 'You're going to shut these agencies down unless you agree to a
10-percent cut.' "

What agencies might
face temporary shutdowns this fall?

Ornstein and Binder agreed that the agencies most likely to
face shutdowns are those related to health-care reform, the environment and
Dodd-Frank financial regulation — the issues on which the Republican
position and that of the White House diverge most sharply.

To target health-care reform, "you'd go for HHS,"
Binder said. "If your other main concern was Dodd-Frank and making changes
to the Consumer Financial Protection Bureau, you might target the SEC."

Ornstein wrote in an email on Monday that he thought
"at least a partial shutdown" of the government was "very
likely" during this year's budget process.

Binder was more skeptical that the hostage-taking tactics
she expects would result in actual shutdowns.

"Ultimately, as we saw in the budget [April] and
deficit [August] deals, the White House tends to compromise at the last minute
to avoid unwanted outcomes," she wrote in an email. "I don't think
Democrats want the government to shut down, and I don't think they'd be
confident that the public would blame the GOP if government did shut
down."

What would happen
during a partial shutdown?

Even without funding, some of the government's
"essential services" are maintained. "Agencies are allowed to
perform any operations necessary for the
safety of human life and protection of property," CNN reported when
Washington was on the brink of a shutdown last year.

While the SEC would not comment on how it would function in
the case of a shutdown, the Department of Health and Human Services has a memo
from last year that describes what
the department would do in the case of a shutdown, including furloughing
nearly 50,000 employees.

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